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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Using the work of others

Orion Retail uses Paylink Services to process its payroll. Paylink provides a type 2 report under ISAE 3402 covering the design and operating effectiveness of controls over 1 January to 30 September. Orion's year end is 31 December. The auditor wants to rely on Paylink's controls for the whole year. What is the most appropriate action regarding the period from 1 October to 31 December?

The auditor should obtain additional evidence for the uncovered period, such as a bridging letter, enquiries about control changes and possibly further tests. The type 2 report remains useful for the months it covers, but it cannot alone support reliance on controls for the remaining three months.

  1. ARely on the type 2 report for the whole year with no further work, as the controls were found effective
  2. BDisregard the report entirely, since it does not cover the full year
  3. CObtain evidence about significant changes in controls during the gap period, for example through a bridging letter and enquiries, and consider further proceduresCorrect
  4. DRely on a type 1 report instead, because it covers the year end date

Explanation

Where a service auditor's report covers only part of the period, the user auditor considers additional evidence for the remaining period, such as confirmation of changes to controls and the results of other procedures. A bridging letter and enquiries help. Ignoring the gap overstates the evidence. Discarding the report wastes valid evidence for nine months. A type 1 report covers design only at a point in time, so it does not show operating effectiveness.

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